TO:����������������������� Board of Regents

FROM:                   Sheila, Stearns

RE:����������������������� State trust lands issue

DATE:                    September 20, 2004

On September 15, 2004, I attended a meeting of the Education and Local Government Interim Committee to address the issue of the administrative assessments being made against MUS trust land income.� The purpose of my presentation was to bring the issue to the Committee�s attention and raise the possibility of the involved parties working out an acceptable compromise.� Bud Clinch, director of the Department of Natural Resources and Conservation (DNRC), spoke in defense of the assessments.� Director Clinch will appear before the Board of Regents on Thursday at 1:30 to address this issue again.� This memorandum provides a summary of the issue and my suggestions for moving forward to seek resolution of this long-standing issue.


In a nutshell, the MUS campuses are the beneficiaries of five separate land grants given to Montana by the federal government at the time of statehood.�� These grants are protected by federal law and the state constitution, which reserve the income from the grants to the exclusive use of the university system.� Since 1963, through a series of legislative enactments, the legislature has allowed DNRC to withhold fees from the earnings realized from these trust lands to cover the expenses of the Division of State Lands in administering the lands.


The FY 2004 projection for the DNRC assessment affecting the MUS is about $698,000.� The past amounts have been estimated to have a present value of between $11 and $12 million.�� DNRC has defended the assessments in general but has stopped withholding administrative assessments on lands granted by Congress in the Morrill Act, the most definitively worded of the federal grants.� The legality of the assessments on the other grant lands is still an issue and compensation for past disputed assessments remains an additional issue.� No ruling by a court or the attorney general has been sought, and the issue is political as well as legal.� The legislature, for example, will point out that it has appropriated to the university system more than enough general fund money to cover the monies withheld through the administrative assessments on trust land.� It is also possible, should we prevail in securing our total grant land income, for the legislature to reduce our appropriation by the amounts needed to fund DNRC�s administration of those lands.���


I suggest, in keeping with the board�s prior vote on this issue, that we discuss a process for exploring a compromise solution to this issue.� My office can spearhead such an effort with the input and participation of campus personnel.� I believe that we can set up an internal framework by which to prepare compromise options and that we can be prepared to begin discussions with DNRC and the legislative council on or before November 1.��